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Greece’s Massive Privatization Thrust Will Change Its Economic Landscape
While few noticed, the debt-strapped Mediterranean country did more that just agree to impose the bitter medicine of unprecedented austerity and structural liberalizing reforms with its lenders of last resort. It also submitted to impose a radical privatization program in exchange for the €110 billion bailout from the International Monetary Fund and the European Union (See my recent interview with the asset sales chief.)
“The target of raising €3 billion over the next three years from privatizations can be exceeded and a significant part of the revenues can be achieved earlier than has been slated under the memorandum, if done right” said Agis Hiliarhopoulos, the Athens based Associate Director at international consultancy firm Kantor. And he should know, because Kantor has previously worked on Greek government privatization projects.
The weighty privatization program — it includes casinos, railways, real estate, betting, water companies, marinas, airports and other infrastructure — is designed to do more than boost recession hit revenue target shortfalls. It can trigger a change in investor perceptions about Greece and kick-off further development of privatized sectors.
That change in views could, alone, could be of critical importance, because the country needs to regain the trust of capital markets so it can return to bond market borrowing. The aid package cash runs out in 2012 and its debt to gross domestic product is likely to top 150% in a short few years. Servicing the already estimated €300 billion debt pile will be a Herculean task in need of investor confidence despite a patchy track record.
One of the reasons that the Greek economy is uncompetitive and withering is because to date it has dismally failed to attract private capital and inject expertise into state controlled assets. It has allowed civil servants to capture public assets for their own benefits at the expense of the whole, and has effectively sacrificed the vibrancy of the economy.
The dead hand of state control, and the lack of motivation to efficiently produce results from permanent and unfireable public servants with a “lifestyle” instead of a “work” ethic, has choked Greece bringing it within a whisker of collapse.
Remarkably, one in five Greek employees works for the state to produce little other than red tape. That type of Soviet or Cuban economic model is just completely unsustainable, as history has shown. It is no accident that joblessness could surpass one million — almost a fifth of the workforce — by year end.
One could even argue a case for sacrificing part of the potential value of a specific state controlled asset in exchange for soft benefits and regional rejuvenation. Politically using the word fire-sale is poisonous, but it does have some financial merit.
While the asset sale effort is starting by cleaning up and offloading the much troubled OSE railways that are bleeding the public purse and taxpayer to the tune of €1 billion a year, the privatization effort should then go on to prioritize and focus upon assets which have the best chances of attracting high profile reputable investors. After all, timing and appropriate priorities are the essence of good selling.
Investment bankers argue the tactic should be to sell assets and grant long concessions for real estate and infrastructure related to tourism and regional trade to revitalize local economies, create jobs and tax revenues. In this context, airports, marinas and logistics infrastructure appear to be the best bets for creating short term positive impacts.
State monopolies in need of restructuring, or projects deriving their cash-flows from domestic sources, are important, but they take more time and attract lower bids.
So far, the government seems to have the political spine to ram through the ambitious privatization program, despite rumbling within its own socialist party ranks, but putting militant union resolve will test its mettle. To date there has been reticence and delays in putting down suffocating strikes due to leftist sensibilities.
But paradoxically it’s a centre-left government in Greece that is imposing orthodox conservative economic policies at long last. That’s because there are no other options and if done right, it could just do the trick by unleashing market forces. The Hellenic crisis, which is the first domino in the Euro-periphery, has its silver lining.
(The Wall Street Journal - Blog)
***
Occhio che tra un pò magnificheranno le prospettive della Grecia ...
- By Nick Skrekas
While few noticed, the debt-strapped Mediterranean country did more that just agree to impose the bitter medicine of unprecedented austerity and structural liberalizing reforms with its lenders of last resort. It also submitted to impose a radical privatization program in exchange for the €110 billion bailout from the International Monetary Fund and the European Union (See my recent interview with the asset sales chief.)
“The target of raising €3 billion over the next three years from privatizations can be exceeded and a significant part of the revenues can be achieved earlier than has been slated under the memorandum, if done right” said Agis Hiliarhopoulos, the Athens based Associate Director at international consultancy firm Kantor. And he should know, because Kantor has previously worked on Greek government privatization projects.
The weighty privatization program — it includes casinos, railways, real estate, betting, water companies, marinas, airports and other infrastructure — is designed to do more than boost recession hit revenue target shortfalls. It can trigger a change in investor perceptions about Greece and kick-off further development of privatized sectors.
That change in views could, alone, could be of critical importance, because the country needs to regain the trust of capital markets so it can return to bond market borrowing. The aid package cash runs out in 2012 and its debt to gross domestic product is likely to top 150% in a short few years. Servicing the already estimated €300 billion debt pile will be a Herculean task in need of investor confidence despite a patchy track record.
One of the reasons that the Greek economy is uncompetitive and withering is because to date it has dismally failed to attract private capital and inject expertise into state controlled assets. It has allowed civil servants to capture public assets for their own benefits at the expense of the whole, and has effectively sacrificed the vibrancy of the economy.
The dead hand of state control, and the lack of motivation to efficiently produce results from permanent and unfireable public servants with a “lifestyle” instead of a “work” ethic, has choked Greece bringing it within a whisker of collapse.
Remarkably, one in five Greek employees works for the state to produce little other than red tape. That type of Soviet or Cuban economic model is just completely unsustainable, as history has shown. It is no accident that joblessness could surpass one million — almost a fifth of the workforce — by year end.
One could even argue a case for sacrificing part of the potential value of a specific state controlled asset in exchange for soft benefits and regional rejuvenation. Politically using the word fire-sale is poisonous, but it does have some financial merit.
While the asset sale effort is starting by cleaning up and offloading the much troubled OSE railways that are bleeding the public purse and taxpayer to the tune of €1 billion a year, the privatization effort should then go on to prioritize and focus upon assets which have the best chances of attracting high profile reputable investors. After all, timing and appropriate priorities are the essence of good selling.
Investment bankers argue the tactic should be to sell assets and grant long concessions for real estate and infrastructure related to tourism and regional trade to revitalize local economies, create jobs and tax revenues. In this context, airports, marinas and logistics infrastructure appear to be the best bets for creating short term positive impacts.
State monopolies in need of restructuring, or projects deriving their cash-flows from domestic sources, are important, but they take more time and attract lower bids.
So far, the government seems to have the political spine to ram through the ambitious privatization program, despite rumbling within its own socialist party ranks, but putting militant union resolve will test its mettle. To date there has been reticence and delays in putting down suffocating strikes due to leftist sensibilities.
But paradoxically it’s a centre-left government in Greece that is imposing orthodox conservative economic policies at long last. That’s because there are no other options and if done right, it could just do the trick by unleashing market forces. The Hellenic crisis, which is the first domino in the Euro-periphery, has its silver lining.
(The Wall Street Journal - Blog)
***
Occhio che tra un pò magnificheranno le prospettive della Grecia ...
o ha assunto altre forme di kama.sutra
. Carpe diem.